The Fight for Unemployment

Bernie Sanders was an advocate for the Fight for 15,­ a $15/hour minimum wage. Hillary Clinton wants to raise the minimum wage to $12/hour. Even the Donald wants an increase to $10/hour. There are even instances of Walmart advocating to increase minimum wage and they’re noted for their cutthroat business practices. Why wouldn’t libertarians go along with this?

Why would Walmart advocate for a raising minimum wage? The truth is that smaller business often can’t afford to pay their retail associates, meaning that higher wages could put them out of business. Any business on the margin are going to find themselves unable to cope with increased labour costs. After their competition are out of business they’re free to raise prices ­- increasing the cost of living.

This is the criticism libertarians have of increases to minimum wage. It results in higher unemployment and higher costs of living. It’s a terrible disaster of a policy in terms of caring for the impoverished. Through instituting these policies we went from one minimum ­wage income being a viable option for supporting an entire family to one one minimum wage income being nearly impossible to support oneself as the cost of living has skyrocketed.

I should draw these two points about higher costs of living and unemployment out further. Forcing an employer to pay a higher wage causes them to raise prices for the products they sell, due to the increased cost of production. Such an employer might not be able or willing to hire new workers at $15/hour and what’s worse, they may look into technology to replace existing workers if the labour costs outweigh the investment into the new technology.

The economic reality is that minimum wage numbers are irrelevant. It doesn’t matter if I receive $15/hour or $1000/hour; if my $15 can only purchase a bag of 5 peanuts then it’s approaching complete uselessness. What matters is the purchasing power of a pay-cheque, not the number of dollars on the pay-cheque. We need to focus on what the pay-cheque can purchase -­ that’s of far greater value.

Aristotle defined wisdom as knowing a thing’s causes. It’s not enough to rally against rising costs of living; wisdom demands we must oppose its causes. The minimum wage is actually a cause of rising costs of living and unemployment ­people who care about such things ought to be tackling the causes not making them worse.

In 1931 Canada followed the siren song of a central bank with monetary policy to control the economy – they abandoned the gold standard -­ where the value of the dollar was a function of the price of gold. Gold was trading for $20.67/ounce and the lowest minimum wage I found in Canada was $0.25/hour. At the time of writing gold is trading at $1621.02/ounce. This offers a stark realization; if Canada hadn’t abandoned the gold standard and rejected all calls to raise the minimum wage, the lowest wage would now be $19.61/hour in terms of today’s purchasing power. The highest minimum wage in any Canadian province is $12.20/hour, but the Federal minimum wage is $7.50/hour (In Canadian dollars, in US dollars this would be $5.69). Sound money would have produced a much more even distribution of wealth but it would be unaccompanied by rising costs of living as inflation is held to a mark ­- the mark of fixed commodities.

The real interesting question is that if the minimum wage ought to be $20/hour with sound money, and it’s not, ‘who’s profiting over this loss?’ The average person on the minimum wage finds the cost of living increases to be mildly unbearable, replete with questions of how they’re going to finance the next month. But with the central bank the dollar is devalued and financing these endeavours are the bankers, who make money off of the increased money supply that fuels the inflation.

Rather than printing off money, which the government has to repay with interest, money has a fixed value under a sound system. So the people financing the monetary increase don’t become wealthier and wealthier as the rest of us become poorer and poorer; wealth has real value that people aren’t able to manipulate to their advantage.

Our system is constructed such that it discriminates against the impoverished. They’re the first to become unemployed. The first to bear the brunt of rising costs of living. The wealthiest are the last to carry these crosses.

The problem with a minimum wage hike is that it’s cosmetic. It’s purely the appearance of wealth but not real wealth. I’ve heard one of the Austrian economists describe it as a narcotic, which gives the illusion of increased well-­being but in reality it’s making the individual worse off. It’s a higher number on the pay-cheque that has less purchasing power.

The libertarian solution is to say no to the empowerment of central bankers. The principles of liberty and charity demand decentralized power. Whatever the left can do, we can do better. They want increases to wages and we can deliver increases to real wages. When we go beyond appearances, beyond stage one thinking, beyond cosmetics and address the substance of what’s happening in our economy, we’re called to liberty.

This post was written by Brandon Kirby.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.